Innovation: The Policy Gap?
10 August 2010
In this open letter, AVCAL Chief Executive Dr Katherine Woodthorpe highlights the need for clear and farsighted policies by both parties for a sustainable innovation system.
In this election process both parties have been curiously silent about innovation, as highlighted in Mark Dodgson and Roy Green’s excellent article in the Australian Financial Review last week, and nothing has been said about venture capital, or programs that support high growth technology-based companies. We need to hear from both parties about their plans for this important part of the innovation system.
Venture capital, a key source of innovation, has been hit hard by the global financial crisis. Institutional investors such as large superannuation funds have not invested in venture capital at all since 2008. In fact, the only venture capital funds that have been raised to invest in high growth technology-based companies since the global financial crisis have been those backed by the Federal Government’s Innovation Investment Fund Program, and the Innovation Investment Follow On Fund, with a total of $104m committed. The Federal Government was the cornerstone investor in the only two new funds raised during this period.
It is fortunate that the government has stepped in to this extent, for the precipitous drop in venture capital fund raising has led to a drought in the supply of capital to emerging high growth technology-based companies. While there are limited funds to continue to support existing companies, there is almost nothing available for new start-up companies. When the global economy recovers there will have been several years in which almost no new companies have been funded.
That gap needs plugging now, if we’re to build a knowledge-based economy generating high levels of exports and sustainable employment in the near future.
Dr Katherine Woodthorpe
Chief Executive, AVCAL
Author: Adrian O’Shannessy, Director, Greenwoods & Herbert Smith Freehills
Author: Dr Kar Mei Tang, Head of Policy and Research, AVCAL